For a given negative economic shock,an economy with higher labor adjustment costs will have a:
A) higher economic growth rate.
B) smaller effect on employment.
C) higher unemployment rate.
D) shorter recession.

Question

Quizplus · Accepted Answer

Labor adjustment costs refer to the expenses and time involved in hiring, training, and firing workers. A higher labor adjustment cost means that firms are less likely to adjust their employment levels in response to negative economic shocks. Therefore, they are more likely to resort to layoffs and downsizing, leading to higher unemployment rates. Hence, the correct choice is C.

For a Given Negative Economic Shock,an Economy with Higher Labor